• Neil Mahoney

Estate Planning Basics For Families With Special Needs Children

Updated: Nov 10, 2021

When most people hear the words “estate planning,” the first thought is that it only applies to the super-wealthy.

However, that is the furthest from the truth. In fact, most families should at least make sure that they have the basic estate planning documents in place.

Specifically for families with special needs children, the importance of estate planning cannot be stressed enough. In this article, we dive into why that is.

The Estate Planning Documents That Are Most Important

As an introduction, we wanted to simply outline some of the more important estate planning documents that you should be familiar with as it relates to family-based estate planning.

  • Guardianship Designations

  • Durable Power Of Attorney

  • Healthcare Power Of Attorney

  • Will

  • Trust

  • Beneficiary Designations

  • Letter of Intent

Each of these documents plays an important role and purpose within a family’s estate plan. Not all will apply to everyone, but making sure that you consider each would be prudent.

Spotlight: Guardianship Designations

For example, if your child is a minor with special needs, it would be very important to consider who you would like to be designated as the legal guardian if you (and your spouse) were to pass away at the same time. By being intentional and thinking about the primary guardian, as well as the back-ups, you will be helping set up your special needs child for success in the long run.

Why Estate Planning Matters For Families With Special Needs Children

The primary two goals of estate planning for families with special needs children are as follows:

  1. Provide for the needs of their child throughout their entire life

  2. Preserve and protect their child’s eligibility in public benefits

Because eligibility for public benefits is so strict, even for those with disabilities, parents of special needs children need to be very careful when they consider financial planning for their families. Specifically, you want to do everything that you can to maintain your child’s public benefits while also using your own wealth to enrich his or her life.

One of the most important estate planning considerations that relates to these two goals has to do with the use of a Special Needs Trust (SNT).

Primer On Special Needs Trusts (SNTs)

For any household that has generated wealth and has goals to pass down some of their wealth to their children, a Revocable Living Trust is a great estate planning tool to achieve that goal. At a high level, your family trust would outline who gets what after you and your spouse pass away. In a simple example, if “all” you had left was $5 million in your checking account and you had two children, the trust could direct that $2.5 million goes to each child.

Here’s where things could get tricky. What if one of your children had special needs and would forfeit their public benefits if they inherited $2.5 million dollars? Simply put, they would run the risk of forfeiting their benefits.

Once we start talking about this similar situation and your children have special needs, this type of “trust-based” estate planning gets more complicated.

There are many different ways that a parent can plan for this, but one of the more common estate planning instruments is a Special Needs Trust (SNT).

The key benefit of a SNT is that there are certain provisions and administering restrictions that make it so that the assets held in the trust are not available for the child to control. By appointing a Trustee to manage the SNT, the child is able to continue qualifying for their public benefits. In addition, the SNT is set up to maintain assets that can be specifically used for the child’s daily and lifelong living needs.

At ABW Wealth Advisors, we believe that wise stewardship of money leads to a better quality of life for your family. We want to improve your life by managing your finances related to your family’s goals and needs. We help special needs families and the wider disability community prosper.

If you’d like to know more about our services and how we can help you and your family deal with the challenges of having a disability, schedule a “Break the Ice Introductory Call”.

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